Liquid mutual funds have been gaining popularity in India due to the combination of decent returns and zero lock-in nature of the investment.
This is known to be lucrative compared to traditional investment options like fixed deposits that lock up money for long periods. Liquid funds are known to generate predictable returns that are generally between 4 to 6%.
But did you know, certain liquid funds come with the added benefit of an instant redemption facility? This can be very useful during emergencies and can also help with other unexpected short-term needs. You can consult a Cube Wealth coach or Download the Cube Wealth app.
What Are Liquid Funds With Instant Redemption?
Liquid funds fall under the low-risk category and invest in short term securities like:
A regular bank savings account currently generates around 2-4% returns, whereas liquid funds can potentially generate up to 6% returns.
When you invest in liquid funds you also have the option to withdraw up to 90% or ₹50,000 (whichever is lower) of your investment relatively quickly with the instant redemption feature. You can consult a Cube Wealth coach or Download the Cube Wealth app.
Upper Limit Per Day
Lower Limit Per Day
90% of investment or ₹50,000
₹500 to ₹1000
The instant redemption facility is used to transfer money instantly to the investor’s bank account through the Immediate payment service facility. “Instant” means it can take close to 30 minutes for the money to be credited to your account.
On Cube we call this the Cube ATM feature, where you can withdraw your investment as quickly as 30 minutes depending on your fund & bank account.
Why Is The Instant Redemption Facility Useful?
Other mutual funds like equity funds take 3-5 business days to process your withdrawal request. Thus, the instant redemption facility becomes one of the most important features that a liquid fund can offer.
You can withdraw your liquid fund investment in less than 30 minutes with the instant redemption facility.
This can be useful in case of emergencies, for example, a family medical emergency, paying an EMI in the face of salary delays, or even floating for a few months post a job loss, etc..
How To Use The Instant Redemption Feature For Liquid Funds?
The process is straightforward. Place a redemption (sell) request as you would normally do on the website or app you use to invest. After that, the funds will be transferred to your account within 30 minutes.
All other fund-specific caveats like expense ratio, exit load etc will apply. Bear in mind that not all liquid funds give you access to the instant redemption facility.
If you're using the Cube Wealth App, you can withdraw money from your liquid funds to your bank account within 30 minutes with the Cube ATM Feature in your app menu.
Can We Redeem Liquid Funds Anytime?
In principle, you can redeem your liquid fund anytime. However, this comes with a catch. You are supposed to place a redemption order before 3 pm IST to get the same-day NAV.
Else, your redemption will be calculated with the next day’s NAV. However, this does not apply to the instant redemption facility, which is one of the other benefits of the feature.
Which Liquid Fund Has The Highest Returns?
Broadly speaking, liquid funds are known to generate predictable returns in the range of 4-6%. There’s a reason for this. Most liquid funds generally invest in debt securities that mature in up to 91 days.
That’s why the risk is relatively low compared to other mutual funds like international funds and even large-cap funds. The returns, as you can tell, mirror the risk profile.
That said, Cube gives you access to the best liquid funds in India that are handpicked by Cube’s Mutual Fund Advisory partner, WealthFirst. These funds usually generate relatively high returns compared to other funds in the category. Let’s take a look at some of these liquid funds.
There are asset management companies like Nippon India, Axis, HDFC, PGIM, Invesco that have introduced the instant redemption feature for liquid funds. With this feature, you can withdraw your money that’s invested in liquid funds within 30 minutes.
Q. Which liquid fund is the best?
Most liquid funds are known to be on the lower risk spectrum compared to equity funds. However, what’s right for you will differ from what’s best for others. That’s why it’s best to consult a trained financial professional like a Cube Wealth Coach to know which liquid fund is the best for you.
Q. How long do liquid funds take to redeem?
Most liquid fund withdrawals are processed within 1 to 3 business days. With the instant redemption that certain liquid funds offer, you can withdraw your investment within 30 minutes.
Q. Are all liquid funds similar, or do they have variations?
Ans. While liquid funds share common characteristics, there can be variations in terms of returns, expense ratios, and the underlying debt instruments they invest in. It's important to review each fund's specifics.
The best liquid fund for one investor may not be the same for another, given varying objectives and risk tolerances. To make the most suitable selection, consulting with a financial advisor and conducting thorough research is advisable. Ultimately, the best liquid funds can be instrumental in optimizing cash management, preserving capital, and achieving reasonable returns with high liquidity and minimal risk.
Note: Facts & figures are true as of 27-10-2021. The funds mentioned are suggestions based on funds handpicked by Cube's expert Mutual Fund Advisory partner. Before investing please take Cube's Portfolio Planner feature to ensure the funds you see are right for your goals, life stage, risk level and finances. None of the information shared here is to be construed as investment advice.
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